Fort Collins and Loveland, CO have once again made the top of the list of best places to live – and retire! 

AARP has posted their article at:
http://www.aarp.org/content/aarp/en/home/family/housing/articles/co-bestplaces.html

 If you are considering the sale of your home this year now is the time to get started. Using local closed sales data and making the assumption that the average closed sale is under contract for four to six weeks and buyers begin looking at least a month or so prior to writing a contract, we have developed the following ‘Showing Activity’ graph:

Note how the activity picks up in February and runs through June before slowing down. Almost 50% of the year’s showing activity occurs during the four months from March to June and nearly two-thirds of the entire year’s activity occurs in the six-month period starting in February.

 It is especially important this year to get your home on the market quickly because of the federal tax credit incentives. Qualified first time home buyers can receive an $8,000 tax credit and qualified repeat home buyers a $6,500 tax credit but only if they have the home under contract by April 30, 2010 and closed by June 30, 201. This means that even more of the year’s activity should take place in the next ninety days.

A good place to get started is to select a real estate professional to market your property. This person can provide you with a detailed market analysis and help you determine the right asking price for your home. This is a very important step because the wrong asking price can mean the home does not get sold, takes too long to sell or, on the other end of the scale, can cost you money by not getting the full fair market value for your property.

An experienced real estate agent can also help you in determining what repairs and improvements should be made to the property and give you tips on presenting and showing your home in the best possible condition.

The agent will also give you a marketing plan, which will include all of the ways they will promote the property to reach the broadest range of qualified buyers.

If you don’t have a favorite, qualified agent check with family, friends and business associates for references. Look for signs in your neighborhood, attend open houses, check the internet or call several of the real estate agencies in the phone book and ask for a ‘top producer’ or someone who is experienced in your neighborhood or price range. You should normally ask two or three agents to prepare a market analysis and marketing plan and during the presentation you will have an opportunity to interview them to determine their knowledge and qualifications. Ask for references and call them. You want to make sure that you end up with an agent who you have confidence in and also one with whom you are comfortable since you will be probably be spending several months together in the business of selling your home.

 If you are arranging to sell your home, this is also the time to begin planning your move. If you are going to purchase another home in the same area, the agent listing your home may be the best person to work with on another purchase. With the possibility of two transactions, you may be able to secure a better deal from one agent. If you are moving to another town or state, your listing agent may be able to assist you in locating an agent in the new area to assist you. The Internet can also be a valuable tool to find real estate agents and agencies in the new market plus a wealth of other information on the community, schools, recreation, and weather and nearly everything else you want to know.

The next step is to implement the repairs and improvements that may be required prior to showing your home. At the very least this will probably involve a de-cluttering which could mean a garage sale, a few trips to the dump and renting a storage locker. Don’t forget the garage, basement, yard, shed and other storage areas. It may also mean some cosmetic improvements like painting, new carpet, perhaps a new light fixture, window coverings, tile, mirror or other decorating tips. There may also be some repairs to be done like checking the HVAC system, fixing that plumbing leak or electrical outlet, perhaps a roof inspection or fence repair. The initial steps of selecting a real estate professional to market your property and getting your property ready for the market can obviously take a few weeks. With increased showing activity starting in February and peaking in just 90 to 120 days NOW is the time to get started.

It’s over – done – finished – kaput and will go down in the books as a very dismal year for local home sales and pricing! The number of homes sold in 2009 dropped 6.9% from the previous year to a total of 2,907 which is off almost 30% from the peak of 4,100 sales just five years ago and the lowest total since 1995. The 4.6% drop in average selling price is just the second decline since our records started in 1976 but the other was just the previous year when prices dropped 1% from 2007 to 2008. So there have been two price declines in a row and the current average selling price of $239,387 means that there has been less than 4% total appreciation in the last five years.

CHART

Now for the good news! Sales in the last quarter of the year were up 28%, albeit compared to 2008 when sales were down 18% from the previous year. Still, it put the brakes on double digit percentage decreases we experienced for much of 2008 and 2009. At the end of September 2009 sales were down 14.6% and on a pace for maybe 2,600 to 2,700 sales for the year so the results in October and November were particularly gratifying. Fourth quarter sales were heavily weighted to lower priced homes, mainly due to the $8,000 first time home buyer tax credit which was due to expire November 30, 2009. Sales of homes priced under $250,000 were up 36% compared to the same quarter last year and accounted for two thirds of all home sales.

The median selling price for the year was down 4.5% to $210,000 so this was right in line with decrease in the average selling price. The home sales that closed in December were on the market for an average of 130 days which is up substantially from the 119 day figure for November sales but the final figure for 2009 was 113 days compared to 112 days last year. The number of active listings took a big drop with just 1,372 homes on the market at the end of December, down from 1,539 at the end of November and the 1,499 homes on the market at the end of 2008.  

More good news is that the $8,000 first time home buyer tax credit has been extended to include homes placed under contract by April 30, 2010 and closed by June 30, 2010 plus there is now a $6,500 tax credit available to qualified repeat home buyers. Add to this 30 year fixed mortgage rates that are still near 5% and prices that have not shown any appreciation for several years and this has to be the right time to be a home buyer. You have heard the old adage ‘what goes up must come down’ but we think it also works in reverse, particularly in real estate, so how about ‘what goes down must go up’ and, in this market, we believe that is going to happen sooner rather than later. For more information on how to get started and for details on the available home buyer tax credits, call a real estate professional today.

In our January 17, 2010 column we will take a more in depth look at previous sales activity and see if the past can tell us anything about the future.

Consumer doubts about the purchase of a first home are sometimes considerable…. Can I afford a home? Will I qualify for financing? Where do I get a mortgage? How will I find a home that fits my needs? What will it cost? There is information available to alleviate these concerns and we encourage you to call a real estate professional to answer your questions and explain the home buying process to you. We believe the next four months offer one of the very best opportunities ever to become a homeowner and while there are many reasons you should make “Purchase My First Home” a New Year’s resolution here are ten benefits of home ownership we think are important. 

1. Pride of Ownership
   Owning your own home adds to your sense of self-esteem and personal pride. The satisfaction that comes from feeling connected to the land you own and the home in which you live is ages-old.
2. Security of Tenancy
   With homeownership comes stability. When renting, you never know when you may have to move because of new ownership, rent increases, deterioration of the property or other changes. As a homeowner, you decide when and if you want to move.
3. Privacy
   While there are usually some limits on the access landlords have to property, almost all landlords can access your property for necessary inspections and maintenance. For many renters, this lack of privacy is a significant discomfort. Homeowners on the other hand generally have much stronger property rights.
4. Decorating
   Homeowners are free to decorate, remodel and accessorize a home any way they want. Not only do you have the right to make improvements, but the value of those improvements becomes yours as well. Having your living space just the way you want it can significantly increase your satisfaction with your living environment.
5. Financial Predictability
   When you buy a home with a fixed-rate mortgage, most of your monthly housing payment is fixed. Financial planning and credit are more easily managed with cost certainty.
6. Building Equity
   When you own your own home, you pay rent to yourself instead of a landlord. Most homeowners pay for their purchase by obtaining a mortgage. As you pay off that mortgage, your equity builds and you gain an increasingly larger share in a valuable asset. Over time, that asset can work for you in many ways, such as home equity lines of credit.
7. Investment Appreciation
   There are certainly no guarantees of property value appreciation but in the long-term real estate valuations almost always increase. As an example, in Fort Collins the average price of a home in 1998 was $160,000 and today it is about $240,000, an increase of 50% or $80,000. When you decide to sell your home this appreciation is usually tax-free. You can reinvest that appreciation in other real estate or you may wish to downsize and keep the ‘profit’ for retirement or other purposes.
8. Tax Benefits
   The cost of home mortgage interest and property taxes are usually tax-deductible. Depending on your circumstances, thousands of dollars in taxes can be saved each year resulting in more take home pay.  In addition, there is an $8,000 tax credit available to qualified first time home buyers as long as you have a purchase contract completed by April 30, 2010 and the purchase closed by June 30, 2010.
9. Interest Rates
   Mortgage interest rates remain at historically low levels. This can save you a significant amount on your monthly payment and / or allow you to qualify for a bigger mortgage.
10. Supply

There is a good selection of all types of homes on the market, most properties are competitively priced and sellers are motivated.

As another year draws to a close, we would like to thank all of you for your comments, questions and suggestions. We appreciate hearing from you and are looking forward to another year of writing this column and wish all of you a Happy New Year!

November was another good month for local real estate with 205 closed sales representing a 39.5% increase from last year. This was supposed to be the last month for the first time home buyer tax credit and no doubt this deadline motivated many people to close on the purchase of a home to receive the $8,000 tax credit. The average selling price again took a bit of a hit due to the fact that over 70% of the sales were for homes priced under $250,000. In the last couple of months home sales have increased 42% compared to the same two months last year and have improved from a 14.6% drop to a 7.5% decrease in year to date sales. But before we get too carried away, we should put this performance in perspective. The 347 homes sold in October and November of 2008 was far and away the lowest in a very long time. The average October sales from 2000 to 2007 were 267 homes and for November 253 for an average two month total of 520, a long way from the 347 last year. The two month total this year of 493 is respectable but certainly not worthy of banner headlines trumpeting a 40% sales increase.

The final quarter of the year averaged 756 sales from 2000 to 2007. In 2008 there were 528 so that quarter last year was down 30% from the average. The sales in the first two months of the final quarter this year total 493 and if we at least equal last years December sales we will finish with around 675 sales for the quarter and 2,900 for the year which is a lot better than it looked just a couple of months ago. Still, this total takes us back all the way to 1995 which is the last time sales were under 3,000. In fact, for the ten year period from 1998 to 2007 Fort Collins home sales averaged 3,848 per year.

The median sales price has held steady for the last few months and is at $210,000 for the year to date compared to $212,000 last year. The average days on market for the November closed sales was 119 days compared to 112 last month and 126 last year. The inventory of homes for sale is the lowest it has been all year with 1,539 active listings at the end of November compared to 1,713 last month and 1.693 last year.

With the extension of the first time home buyer tax credit and a new $6,500 tax credit for qualified repeat buyers, together with 30-year mortgage interest rates under 5% plus the encouraging national housing data and economic news we remain hopeful that housing sales have bottomed out and we will see an improvement in sales and prices entering the new year. The biggest challenges facing our market will be making a dent in the inventory of homes priced above $450,000 plus dealing with the so-called ‘shadow inventory’. These are homes that are not yet on the market, either held in foreclosure or owned by the hundreds of home owners who would like to sell but have not listed their homes due to the very difficult market. As buyers gain more confidence and home sales improve we will have a lot of inventory to work through to get back to a normal market balanced between buyers and sellers.

By this time, you are probably aware of the two home buyer tax credits that were approved on November 6, 2009 but we wanted to give you the ‘fine print’ details.

The first is actually an extension of the $8,000 first time home buyer tax credit that was introduced earlier this year and originally set to expire at the end of this month. It has now been extended to include homes placed under contract by April 30, 2010 and closed prior to July 1, 2010. The rules are the same as in the previous legislation except that the income limit has been increased to $125,000 for single home buyers and $225,000 for married couples who file a joint return. Individuals with incomes up to $145,000 and joint filers with incomes up to $245,000 qualify for reduced credits.

A first time home buyer is defined as someone, including both partners of a married couple, who has not owned a principal residence for three years before the purchase. The credit is for 10% of the purchase price up to a maximum of $80,000 and does not apply to homes priced at more than $800,000 – usually not a problem for first time home buyers. Buyers do not qualify if they purchase from a lineal ancestor or descendent, including parents or grandparents and children or grandchildren or from a spouse or the spouse’s lineal relatives. You can claim the credit with a co-signer but not if you are claimed as a dependant on someone else’s return.

Taxpayers who claim the credit must use the home as a principal residence for the next three consecutive years. The credit is refundable which means that if the amount of income tax you owe is less than the credit amount you qualify for, the government will send you a check for the difference.

All types of homes qualify including new or resale singe family detached and attached townhomes and condos. The tax credit can be claimed on either the 2009 or 2010 tax return. If you are determined to close on the purchase of a home prior to the June 30, 2010 deadline, you may consider adjusting your current withholding to give you more money each month to apply towards the down payment and closing costs.

The new $6,500 tax credit applies to repeat home buyers as long as they have lived in one residence for five consecutive years out of the last eight. The rules for income and timing are the same as for first time home buyers as well as the type of home. There is nothing that says the home purchased has to be worth more money nor is there anything that says you have to sell your existing home. If you retain your existing home, the home you purchase and claim the credit on must become your principal residence for the next three consecutive years.

There is a lot of additional information about the tax credits available on line. The National Association of Home Builders is sponsoring a good one at www.FederalHousingTaxCredit.com.

If you qualify, the tax credit is real money in your pocket and can be used to reimburse you for some of the expense associated with the purchase or provide funds for home improvement or for anything you can imagine.

It is very doubtful that the tax credit will be extended again, so if you are a qualified first time home buyer and have been considering the purchase of a home don’t wait and miss the boat. It can easily take a month or two to find the right home, you need to qualify for financing and it can take another six to eight weeks to close on the purchase of a resale home and longer if the home is under construction. Add in the holiday season coming up when most people are busy doing other things and it is easy to see – the sooner you get started the better. If you are a qualified repeat buyer who has been thinking about a the purchase of newer home or an older home, a smaller home or a bigger home, a new neighborhood or across the street, you just got a $6,500 gift, if you can make it happen. Most importantly, if you need to sell your current home to purchase another home, you need to get started today. Call your real estate professional and get the planning under way.

Last month we reported on the local real estate sales for September and noted the big improvement in sales for the month and for the third quarter compared to the previous six months. A few late reported sales actually turned September from a 1.7% decrease to a 2.9% increase and the third quarter ended up less than 1% down from the previous year. We also noted that almost 30% of the listings under $250,000 were under contract, no doubt many of them due to the $8,000 first time home buyer tax credit which was due to expire at the end of November 2009 and suggested that this could provide a nice boost for the final quarter and might carry us to a sales increase for the final quarter; something we have not had since the last quarter of 2006.

Well it happened! October home sales were up a very welcome 41.5% compared to last year and a lot of thanks has to go to the tax credit since almost 80% of these closings were for homes priced under $250,000 compared to a normal 65%. The average selling price was down slightly to $238,021 but that is welcome also compared to the 8.9% drop in September and the 10% drop in August. In the two months since the end of August the decrease in home sales has improved from 16.3% to 10.1% and the increased sales have come without a reduction in the average selling price.

 The 41.5% increase in the Fort Collins area sales for October also stands out compared

to our neighbors. The Loveland area reported 149 closed sales in October, just about even with the 150 last year and Weld County had 275 closed sales, a drop of 9.5%

The median price for October was $213,000 and is $210,000 for the year to date compared to $212,500 last year. Days on market for October closed sales averaged 112 days compared to 118 days last year and the inventory of homes for sale dropped 8.2% to 1,713.

And there is more good news. As of this writing, both the Senate and the House have passed a bill and sent it to the President extending the $8,000 first time home buyer tax credit all the way through to include homes placed under contract by April 30, 2010 and contracts closed by July 1, 2010. For those procrastinators or those who were not ready or not yet qualified this gives you another six months to take advantage of the $8,000. Plus the proposal would raise income limits for the credit to $125,000 for single buyers and $250,000 for married couples. It also appears that other home buyers will get a bonus as there is a $6,500 tax credit approved for home owners who decide to sell and buy another home, as long as they have owned their current home for five years. Naturally there is some fine print with both of these proposals that we will review as soon as the details are finalized.

On top of all this good news is that mortgage rates, which increased slightly over the last couple of weeks, are headed back down – and are again just under 5%. The decision of the Federal Reserve Open Market Committee at their meeting on November 4, 2009 to maintain the federal funds rate at 0 to 0.25% and to purchase a total of $1.25 trillion of mortgage backed securities will continue to provide support for mortgage lending. Coupled with the extended and expanded tax credit we expect the housing market to continue to improve.

Maybe it is time to go find the band wagon!

The $8,000 first time home buyer tax credit is in the news. The current credit is due to expire November 30, 2009 and the National Association of Realtors estimate 1.8 million home buyers will have used the credit by the end of November, including 355,000 who would not have purchased a home without it.

Congress is now debating whether to extend and perhaps even expand the credit to all home buyers. House Speaker Nancy Pelosi said in a recent news conference that an extension is under consideration. “And the question is, would that be just first time homeowners or would you open it up to other purchasers of homes”, she said. Mark Zandi, chief economist for MoodysEconomy.com is among those who favor extending the credit and making it available to all homebuyers. “The most fundamental argument for the credit is that nothing works in the economy if housing is falling,” Zandi said. “The credit is a good insurance policy. It’s vital to stem the housing price decline”.

* * * * *

Mortgage activity has dropped slightly and mortgage rates have increased slightly in the last week according to the Mortgage Bankers Association weekly survey. Mortgage applications decreased 1.6% on a seasonally adjusted basis and refinance applications were 67.4% of total applications. 30-year fixed rate mortgages increased to 5.01% from 4.89%.

* * * * *

Economic forecasters predict that 2010 will be the first year since 2005 that housing will contribute to the growth of the U.S economy, according to a survey released by the National Association for Business Economics. Home prices are expected to increase 2% next year, but forecasters don’t believe this increase will discourage homebuyers. More than 80% of economists surveyed by NABE think the recession is over and recovery has begun, but they expect the expansion to be slow because unemployment persists.

* * * * *

The Chief Economist of the Mortgage Bankers Association, Jay Brinkmann predicts sales of existing home will rise 11% in 2010 and new home sales will climb 21%. “We still see a concentration in the lower end of the market,” Brinkman said. “The entry level homes are in demand.”

David Stevens, commissioner of the Federal Housing Administration predicted that mortgage rates will rise to 5.6% by the end of 2010, though not enough of an increase to discourage a 12% increase in mortgage applications next year.

* * * * *

The American dream of homeownership is still a good bet, financial advisors say. Despite the downturn in the last couple of years, homes have still appreciated an average of 4% a year since World War II. Plus, it’s a leveraged investment; a 10% down payment yields a 1,000 percent return if the price of a home doubles. There are also valuable intangibles. Owning a home provides independence, security, community and a roof over the owner’s head. No one can say that about investing in stock.

* * * * *

Last Sunday we reported on the September and third quarter local real estate sales and there are a couple of updates. A few late sales increased the total for the month to 243 closed sales which means we actually had a 0.4% increase in sales for the month. This increase is just the second one in the last two years with the other increase also being in the third quarter. In addition, the average selling price for the month has been corrected to $247,864, a big improvement over the $243,069 reported last week. For the third quarter sales totaled 912 homes, a slight 1.6% decline compared to last year. Prospects are good for improved sales over the next couple of months as the scramble is on to take advantage of the $8,000 first time homebuyers tax credit which is still due to expire on November 30, 2009.

Local real estate sales for September came within an inch of matching last year’s sales and, while down 17.5% from August, this is a big improvement from the 26% drop comparing the same two months in 2008. The average selling price of $243,069 was off 8.1% from last year but improved 6.9% from the previous month. Results for the third quarter are much improved over the first two quarters of the year with a sales decline of just 2.3% compared to 22 and 21% drops in volume in the first two quarters. Most of this recent improvement in sales seems to be as a result of the first time home buyer tax credit as 70% of sales in the third quarter were homes priced under $250,000. This compares with a normal market share of 65% or less. This emphasis on lower priced homes is the reason for the drop in average selling price which is down 7.1% in the third quarter compared to 5% in the first quarter and 1.1% in the second quarter.

For the year, home sales are down 14.6% and the average price has declined 4.4% to $240,951. The median price is down just 1% from $212,000 in 2008 to $210,000 in 2009. The closed sales in September were on the market for an average of 106 days, better than the 114 days last year but a little worse than the 104 figure for August sales. The inventory of homes for sale increased year over year for the first time in a couple of years with 1,866 active listings on the market at the end of September compared to 1,809 last year.

Sales in the last quarter of the year normally account for about 17 – 18% of the annual sales. This means we are looking at total sales for 2009 in the range of 2,650 to 2,700 homes with an average price of $240,000 and a total sales volume of $640 million. These figures take us away back in time: 1990 was the last time sales were below 2,665 homes, 1998 was the last time total sales volume was less than $680 million and the average selling price increased from $245,243 in 2004 to $251,092 last year so five years of appreciation is getting wiped out.

On the positive side, the third quarter put the brakes on 20% sales drops and sales in the next three months should be relatively strong. There has been no action to expand or extend the $8,000 first time home buyer’s tax credit which is due to expire at the end of November so it appears the scramble is on. Of the 934 current active listings priced under $250,000 an amazing 268 of them are under contract and, we would expect, due to close prior to the end of November. This will be a nice boost in the final quarter and might carry us to an improvement of the 528 sales recorded last year. This is in line with the National Association of Realtors which reported the August pending home sales index jumped 6.4%, the seventh straight month of increases and the highest rate since March 2007. Typically there is a one to two month lag between contract and closing so this index is a barometer of future sales. More good news came from the Commerce Department which reported new home sales were up by 0.7% in the latest month and spending on residential construction was up 4.7%, the largest advance since November 1993. Even the Case-Shiller home price index finally issued some good news and took its biggest jump in four years, up by 1.6% last month.

On top of all this, mortgage rates are under 5% and approaching 40-year lows. It seems we are in a perfect storm of conditions that might never happen again: a good supply of homes at very attractive prices and record low mortgage rates. To give one example, at the peak of the market in 2007 the average Fort Collins home sold for $253,000 and the 30-year mortgage interest rate was 6.5%. With 20% down, this $202,400 mortgage had a monthly payment of $1,266. Today, the average selling price is $240,000 and the interest rate is 4.9% which with an 80% loan equals a monthly payment of $1,019. Another way to look at it is that $1,266 payment in 2007 bought a $253,000 home. Today it buys a $300,000 home.

It’s a great time to be a home buyer – but it is a bad time to be ‘on the fence’ because we have to be at the bottom and prices and interest rates are bound to increase.

This could be the last call for the $8,000 tax credit! If you qualify as a first time home buyer or have not owned a home for the last three years you are currently eligible to receive an $8,000 tax credit on the purchase of a home as long as the purchase closes by November 30, 2009. You should allow about forty five days from the date of the contract to the close of the purchase so there is a very short window of a couple of weeks to find the right home, make an offer and get it under contract. Plus we expect the last couple of weeks of November to be very busy with buyers trying to close purchases to beat the deadline, coupled with the fact that November 30^th is the Monday following the Thanksgiving weekend.

The National Association of Realtors estimates that the tax credit has been responsible for 350,000 home sales this year. Moody’s Economy.com put the number at 400,000. This success has meant the cost has soared to $15 billion, twice the original estimate and now there is a debate going on between those that want it extended and even expanded and the skeptics who call it one of the worst provisions of the stimulus package, on the grounds that the money is a bonus for people who would buy a house anyway. Even the Denver Post, in an editorial in their September 17, 2009 edition, called for an end to the plan saying that “The $8,000 federal credit for homebuyers should be allowed to sunset” and that “Government involvement in the industry is out of hand”.

Obviously the National Association of Realtors and the National Association of Home Builders are others in the industry are lobbying hard for an extension of the plan through to next summer and for an increase of the tax credit to $15,000 plus an expansion to allow all buyers to qualify. Their position is that the tax credit has had a positive impact on the real estate market but this progress could grind to a halt quickly if the credit is not extended and expanded. Mark Zandi, chief economist for Moody’s Economy. Com believes the credit should be expanded to all homebuyers, even investors, through the summer of 2010. “The risks of not doing something like this are too great,” he said. “I don’t think the coast is clear.”

So while the debate goes on, the only way to insure that you get the credit is to plan on buying a home and closing on the purchase within the next sixty to seventy days. That is not a lot of time but it is possible. There is a good selection of homes on the market, both new and resale and most sellers are motivated to get a deal done – even with the prospect of having to move Thanksgiving weekend.

To make sure you qualify, here are the rules:

1. The tax credit is equivalent to 10% of the home purchase price, capped at $8,000.
2. It applies only to first time home buyers, defined as someone who has not had an ownership interest in a principal residence for three years before buying a house.
3. It applies only to those who close on the purchase a home from January 1 to November 30, 2009.
4. The tax credit does not have to be repaid and it is ‘refundable’, meaning qualified buyers can take advantage of it even if they don’t have an $8,000 tax liability. You will get a refund check for anything over what you owe up to the $8,000 limit.
5. The tax credit is subject to income limitations. Single buyers need a modified adjusted gross income of $75,000 or less and $150,000 for married couples. Those earning more may be eligible for reduced credits.
6. Buyers have to own the home for at least three years or, in most cases, the credit must be returned.

If you qualify and you are ready to take advantage of this $8,000 credit you need to get started – today!